Step 1) Verify & Select Your Nonprofit Name
Choosing a great name is the first step in your nonprofit journey. Having a catchy, relevant name that’s distinct from any business/organization registered in the state of Arizona is as important for branding as it is for legal compliance. For both reasons, your name also should:
- Not contain any of the following words (unless you’ve been approved by the Arizona Department of Financial Institutions): bank, credit union, deposit, savings association, building association, thrift, trust
- Align with your domain name (to make it easy for folks to find you!)
- Be distinguishable from any other registered entity name in Arizona
If your desired name is already taken by an existing business or organization, you’ll have to modify it enough that it’s considered distinguishable. The Arizona Corporation Commission defines distinguishable to give you an idea of how you may alter your name to meet this requirement.
What To Do:
Once you’ve thought up a great name for your nonprofit, do a business name search to see if it’s available. If it is, you can either reserve it for a $10.00 fee, or wait to lock it down until you file your Articles of Incorporation.
It’s also a good idea to head over to GoDaddy and search for a quality domain name. If there’s one available, it may be worth buying now — even if starting a website isn’t the first thing on your agenda.
Quick Note: Before you commit 100% to a name, you may also want to check that there’s a decent URL available for your business. Use WEEBLY to search your options. If there’s a quality domain name for purchase, we advise buying it right away. Even if launching a business website isn’t on your radar right now, it’s going to be soon, and you might as well nail down a domain name that’ll make it easy for customers to find you!
Step 2) Appoint A Statutory Agent & Initial Director(s)
Before you can officially form your nonprofit corporation, you need to rally a few folks to fill some important roles. Your Arizona statutory agent and initial director(s) are two things you have to have locked down before you can complete your Articles of Incorporation.
An organization’s statutory agent, or registered agent, is the party responsible for accepting service of process notices, tax forms and other legal documents on their behalf. They must be a permanent resident of Arizona or a company that’s authorized to represent businesses in the state. You are allowed to act as your own registered agent in Arizona, but you may not want to if:
- You maintain abnormal business hours
- You don’t want to make your personal address public (if you’re running the nonprofit from home)
- You’re worried about being served in front of family, friends or employees
If you haven’t settled on your initial director(s) yet, now’s the time to do so. Arizona only requires nonprofits to have a minimum of one director, so you have the liberty to structure your organization however you wish. But whoever you decide to involve, make sure they share your passion for the cause, have some level of business-savvy, and are ready and willing to invest the necessary time to get the organization up and running.
What To Do:
There are quite a few ways to go about appointing a statutory agent. If you’re thinking of acting as your own, read through our guide for a closer look at what it will entail. As far as professional statutory agent services go, we think the smartest route is to get them through an online filing provider like Harbor Compliance. They include a full year for free when you form your nonprofit with them.
Step 3) File Articles of Incorporation
Now that you’ve assigned the right folks to all the necessary roles, you’re ready to tackle your Articles of Incorporation. This is the document you’ll file with the state in order to officially form your nonprofit (although not a 501(c)(3) organization, yet). You’ll be asked to provide the following information:
- Your entity name
- Your character of affairs (the primary activity your nonprofit is up to)
- The name and business address of your director(s)
- Your known place of business address
- Your statutory agent’s name and street address, along with a signed Statutory Agent Acceptance Form
- The name, address and signature of your incorporator(s)
In addition to the Articles of Incorporation and Statutory Agent Acceptance Form, you’re also required to submit an Initial Certificate of Disclosure. This form asks if anyone involved in your organization has committed a few specific types of felonies, or been involved in another company that’s gone bankrupt. If you answer yes to anything, you’ll have to file some additional paperwork. Keep in mind that all of these documents must be submitted simultaneously.
What To Do:
If you’re filing independently, fill out all of the documents above with great attention to detail -- all the information you provide must be 100% accurate. Once you’re finished, send all your documents along with a $40.00 check to the following address:
Arizona Corporation Commission
Corporate Filings Section
1300 W. Washington St.
Phoenix, Arizona 85007
On the other hand, if you work with a nonprofit formation service, you’ll have all of this (and more) taken care of for you. We highly recommend taking this approach, especially since forming a 501(c)(3) nonprofit is more complex than any other entity type. Check out our top 7 nonprofit formation services to learn more about what they have to offer.
Step 4) Get An EIN
Once you’re an official nonprofit organization it’s time to get yourself an EIN, or Employer Identification Number. Your EIN is the federal government’s way of tracking your organization’s financial activity. All corporations are legally required to have them, but they’re especially important for nonprofit corporations seeking tax exemption.
The IRS is going to need to keep a close eye on your practices before and after 501(c)(3) status is granted, so it’s in your best interest to apply for your EIN now. Fortunately, it’s a fairly quick and straightforward process.
What To Do:
The best approach to getting an EIN is to simply fill out the IRS online application. This method is free and more efficient than any other -- you’ll get your number as soon as you’re done filling it out. However, you can also apply via fax, phone or mail. Read our EIN guide to learn how.
Quick Note: Keep in mind that if you end up buying a comprehensive nonprofit incorporation package, they may automatically obtain your EIN for you.
Step 5) Meet With Directors & Establish Bylaws
It’s time to sit down with your director(s) and have a long talk about how the organization is going to be run. During this initial meeting, you’ll need to tackle:
- Detailing everyone’s role and responsibilities
- Electing corporate officers
- Agreeing on conditions for adding or amending bylaws
- Deciding on what actions may or may not be taken without a meeting
- Writing your first meeting minutes
This is also when you’ll discuss and adopt nonprofit bylaws. Your bylaws will serve as your governing document for as long as the organization is in existence, so hunker down and put the effort into making them well-rounded and thorough from the start. Basically, this meeting is a pivotal point at which your organization can truly come to life -- so it’s important to take it seriously.
What To Do:
A great way to prepare is to take a look at some nonprofit-specific meeting minute and bylaw templates. Familiarize yourself with the content so you know what you need to get done going in. It’s also worth scrolling through some of Arizona’s nonprofit corporation statutes (Chapter 24-40) to cover any areas of uncertainty.
Step 6) Start A Corporate Records Book
Now that you’ve collected quite a few legal documents, it’s a good time to invest in a corporate records book. This can really be done at any point in the process -- the most important thing is to simply keep all of your records in order, like your:
- Articles of Incorporation
- Nonprofit bylaws
- Meeting minutes
- Tax forms
These documents, and many more, will find a safe home in your corporate records book.
Your corporate records book may be a simple binder, or a full-on corporate kit with a custom seal, printed bylaws and meeting minutes. Having a corporate kit is a great way to assert your organization’s legitimacy, both internally and externally. However, you aren’t obligated to purchase a high-end corporate kit if it doesn’t suit your needs.
What To Do:
If you’re thinking about getting a corporate kit, Blumberg and Bindertek are two companies that offer nonprofit-specific ones. You can also look into your incorporation provider’s rates for corporate kits — often this is the cheapest and easiest option if you’re already working with one of these services. Otherwise, if all you want is a basic leather binder, you can likely find something that will meet your needs at your local office supply store.
Step 7) Apply For Tax Exemption
This is by far the most involved step in the process of forming a 501(c)(3) nonprofit. Achieving tax-exempt status requires being approved by the IRS directly.
Depending on the size of your nonprofit (and a few other factors), you’ll either have to fill out Form 1023 or Form 1023-EZ. Form 1023 is quite a bit longer and comes with a 6-month turnaround time, while Form 1023-EZ is more streamlined and promises half the waiting period.
So needless to say, it’s worth inquiring to see if your organization qualifies. Scroll through the Eligibility Worksheet on page 11 of the Form 1023-EZ Instructions -- if you answer “yes” to any of the questions, you’ll have to use the longform version instead.
It’s worth noting that Arizona does grant some state tax exemptions to nonprofits, but you’ll need to be approved by the IRS first. To get an idea of what exemptions your organization could be approved for, you can read through this brochure or contact the AZ Department of Revenue directly.
What To Do:
While you have every right to tackle this part on your own, we highly recommend taking advantage of a comprehensive nonprofit filing service or attorney to make sure it’s done right the first time. It may be an investment up front, but it’ll pay off in the long run to be totally certain that you’ll be approved by the IRS. Our top recommendation is Harbor Compliance — they’re one of the only companies that offers total 501(c)(3) coverage.
Step 8) Start a Bank Account & Manage Finances
The final piece of the puzzle is starting a bank account for your nonprofit. Hopefully, you’ll have discussed banking options during your initial board meeting, and decided on your priorities. These may be:
- The bank’s customer service
- The account’s fee structure/minimum balance
- National ATM access
- Online banking features
- Nonprofit-specific incentives
Various banks rank differently in each of these categories. If you haven’t decided yet, don’t just hop on the first one that comes to mind. Spend a few hours researching your options -- read some reviews, call a few customer service lines and visit local branches to find out which would be the best fit.
What To Do:
Local and national banks both have their upsides. Check out a few Arizona-rooted banks like OneAZ Credit Union and Bank of Arizona, and read up on some larger ones like Chase and Bank of America (our favorite national banks that operate in the state).
Once you’ve gotten your bank account set up, sync it with some accounting software as soon as you get the chance. Proper financial management is necessary for any business, but it takes on a whole new weight when it comes to a 501(c)(3) organization.
The federal government is going to keep a very close eye on your financial activity, so it’s of the utmost importance to keep track of every move you make through a reliable accounting program — especially until you can hire an accountant of your own.